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Acting on a tip-off, police laid a trap near the Tata Power Company Limited at Mankhurd for Shetty (40) and Mudaliar (35).
On spotting them, the police ordered them to surrender, but the gangsters fired at them. The police returned the fire, injuring them both.
The gangsters were rushed to a nearby hospital where they were declared dead before admission, the police said.
Shetty had become Chhota Rajan's right-hand man after two of the gangster's trusted lieutenants Guru Satam and Hemant Pujari parted ways with him.
PTI
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